Beer in Lithuania

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Executive Summary

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TRENDS

In 2016, beer in Lithuania continued to decline in terms of total volume sales due to numerous reasons, including new legislation, unfavourable weather conditions over the summer season, the introduction of a deposit system, and another increase in excise taxes, as well as the declining population. The deposit system for particular sizes of PET, glass and metal was introduced at the beginning of 2016, which resulted in additional costs for producers and importers of soft and alcoholic drinks. Also, on 1 March 2016, excise duty on beer rose by 8%. Producers and importers of beer transferred part of the newly incurred costs to the final prices of beer which negatively affected total volume sales in 2016. Beer sales were also slightly hampered in 2016 by a ban on alcohol sales through forecourt retailers. In addition, since 1 November 2016, it has been forbidden to display discounts on alcoholic drinks in stores. This was another factor which contributed to the poor performance of beer in 2016.

COMPETITIVE LANDSCAPE

Svyturys Utenos Alus UAB is the undisputable leading player within beer in Lithuania, holding a total volume share of 35% as of 2016. The company is a subsidiary of Carlsberg A/S and is a producer and wholesaler of multiple well-known local and global brands. Its Svyturio flagship brand enjoys strong popularity among consumers in Lithuania and has excellent availability through different distribution channels. Prior to the opening of Lidl stores in Lithuania in 2016, it was announced that, alongside its private label beer, the new discounter chain will also sell Svyturys Utenos Alus’s production which gave a competitive advantage to the company over other beer producers in the country. However, after excise taxes on beer were increased by 112% on 1 March 2017, Svyturys Utenos Alus raised the price of one pint (0.568 litres) by EUR0.22, while consumers and retailers expected an increase of EUR0.10-0.12 per pint, as it would be enough to cover the impact of a rise in excise duty. Expressing dissatisfaction regarding too high growth in Svyturys Utenos Alus’s beer prices, Norfos Mažmena UAB decided to stop selling the company’s beer in its stores in May 2017 and gave its shelf space to small beer producers instead, which may have a negative impact on Svyturys Utenos Alus UAB’s total volume share in Lithuanian beer in 2017.

PROSPECTS

The newly elected government has openly expressed its intentions to reduce the consumption of alcohol in Lithuania over the forecast period and, therefore, plans to introduce numerous new changes in legislation which will negatively affect the performance of all alcoholic drinks including beer. In March 2017, excise taxes on beer were raised by 112% and further increases are expected on a yearly basis. Also, the government plans to increase the legal drinking age from 18 to 20 years old, and completely ban any types of promotion of alcohol, reduce the alcohol selling time, ban the selling of alcohol at events and seasonal outdoor bars. Due to the drastic increase in excise taxes since 1 March 2017 and other unfavourable legislative changes planned, producers of beer already raised their prices at the beginning of 2017, reduced investment in production facilities and started talking about lay-offs.

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